What are the Most Useful Indicators of Development?

There are hundreds of economic, political and social indicators of development, ranging from ‘Hard’ economic indicators such as Gross National Income (and all its variations), to various poverty and economic inequality indicators, to the Sustainable Development Goals, which focus much more on social indicators of development such as education and health, all the way down to much more subjective development indicators such as happiness.

In this blog post I consider what the most useful indicators of development are for students of A level sociology, studying the excellent module in global development.

I’ve thus selected the indicators below to try and represent:

the most commonly used indicators collected by some of the major development institutions, both multilateral agencies such as the World Bank, as well as NGOS.

The indicators you need to know for the ‘indicators of development topic – most obviously GNP, the HDI and the MDGs.

Other indicators which are useful to know for different sub-topics within the global development course (health, education, gender, conflict, the environment etc…)

Taken together these indicators should provide enough breadth of measurements to gain a very good (for A level standards) insight into the level of development of a country, without resulting in information overload and mental meltdown…

Most of the above indicators below have been developed and are monitored by either the World Bank or the United Nations, but I’ve also included others, such as the Global Peace Index, which are collated by other agencies, so as to broaden out the data sou

The indicators I consider in more detail below are as follows.

Total nominal Gross Domestic Product

Gross National Income per capita (PPP)

The percentage of people living on less than $1.25 a day

The percentage of people living below the poverty line within a country.

Nominal GNI is useful for giving you an idea of the ‘economic clout’ of a country compared to other countries. The real global power players (in terms of military expenditure) are all towards the top of this.

These figures, however, tell you very little about the quality of life in a country…. for that you need to divide the figure per head of population and factor in the cost of living in the country….

Gross National Income Per Capita (PPP)

Gross National Income Per Capita – is GNI divided by the population of a country, so it’s GNI per person.

(PPP) stands for Purchasing Power Parity – which alters the raw GNI per capita data to control for the different costs of living in a country, thus modifying the GNI figure in U.S. dollars to reflect what those dollars would actually buy given the different costs of living in different countries.

GNI per capita (PPP) gives you a general idea of what the general economic standard of living is like for the average person in a country, however, there are serious limitations with this indicator – the main one being that it does not tell you how much of that income actually stays in a country, or how income is distributed. Quality of life will thus be a lot better for some people, and a lot worse for others than these gross statistics indicate.

The Percentage of People Living on Less than $1.25 a day

There are still around 800 million people around the world living on less than $1.25 a day (PPP), the figures for some of these countries are below:

The Democratic Republic of Congo (88%)

Bangladesh (47%)

India (26%)

China (6%)

Looking at absolute poverty statistics like this gives us a much fuller understanding of the lack of development in certain countries – in DRC, you can clearly see that poverty is endemic (absolute poverty is a significant problem in many Sub-Saharan African countries), and we can also see that absolute poverty is still a significant problem in India (mainly rural India) and while the 6% is quite low in China, this 6% represents 10s of millions of people, given the large overall population size.

Proportion of population living below the poverty line within a country

The UN sustainable development goals states that one of its aims (under goal 1) is to ‘reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions’. (Source – The United Nations Sustainable Development Goals)

The United Nations collects this data for countries will lower human development, but not for countries with high human development, and so here we are reliant on data from national governments or other agencies – and the problem here is that different countries measure their ‘poverty line’ in different ways, so this means making cross national comparisons are difficult. Some sources are below:

Selected Stats on the Proportion of People Living Below the Country’s own poverty line:

Most low income countries with high absolute poverty rates register percentages of between 30-60% living below their own poverty lines.

The USA has 15% of its population living below its poverty line (a household income of around $24000 per annum)

The UK also has around 15% of its population living below its poverty line, although its line is higher than the US – around $30000.

So how useful is this ‘relative measure of poverty’ as an indicator of a country’s level of development?

They give us far more insight than the GNI per capita PPP figures, because they tell us about income distribution. Can you really call a rich country developed if 15% of its population aren’t earning enough of an income to fully participate in that society?

We also need them as an addition to the absolute figures of poverty – absolute poverty doesn’t exist in the wealthiest countries, but clearly relative poverty does.

HOWEVER, the differences in how relative poverty figures are calculated does make it difficult to make comparisons.

Also, some figures in the UN’s data just don’t seem believable – some ex-communist countries (such as Kazakhstan) report that only 5% of the population live below the country’s poverty line – either than line is extremely low or there’s maybe a little bit of mis-reporting going on?

The Human Development Index

The Human Development Index is compiled annually by the United Nations and gives countries a score based on GNI per capita, number of years of actual and expected schooling and life expectancy, or in the words of the UN itself – the HDI is ‘A composite index measuring average achievement in three basic dimensions of human development—a long and healthy life, knowledge and a decent standard of living.’

The Gender Inequality Index

The United Nations defines the Gender Inequality Index as ‘A composite measure reflecting inequality in achievement between women and men in three dimensions: reproductive health, empowerment and the labour market’.

More specifically, it gives countries a score between 0-1 (similar to the HDI) based on:

The Maternal mortality ratio: Number of deaths due to pregnancy-related causes per 100,000 live births.

The Adolescent birth rate: Number of births to women ages 15–19 per 1,000 women ages 15–19.

Proportion of seats held by women in the national parliament expressed as percentage of total seats.

The proportion of the female population compared to the male population with at least some secondary education

Selected countries according to their rankings for the Gender Inequality Index

1st – Slovenia

11th – Finland

39th – The United Kingdom

55th – The United States

56th – Saudi Arabia

97the – Bhutan

127 – Ghana

130th – India

The obvious strength of this is that we get to compare the life chances of women in a country to those of men. What’s (maybe) surprising is that while there does appear to be a general correlation between high GNI per capita (PPP), high human development and low gender inequality, the correlation is not perfect: as is evidenced by the USA being just one place above Saudi Arabia and Ghana being just a few places above India, despite these two pairs of countries having quite divergent levels of ‘human development’.

Notes

Composite Versus ‘Single Variable’ Indicators

Some of the indicators above are ‘composite’ indicators – which are formed when individual indicators are combined into a single index, giving countries a simplified score, such as the Human Development Index, the Gender Empowerment Index and the Global Peace Index; others are ‘single variable’ indicators – such as the Child Mortality Rate, which just measure one thing.

My reasons for considering both composite and single indicators of development are that while composite indicators crunch more data into a single figure, and thus allow you to make more ‘in-depth’ snap-shot comparisons, single numbers simply don’t give you a sense of the real difference between countries, so these are necessary to highlight the extent of the difference between countries in terms of economic, social and political development, or lack of it.

(1) of course, studying development comparatively may or may not, in itself be useful!